Insights Of Two AIM listed Tech Companies - Surface Transforms Plc & Falanx Group Limited

  • Sep 20, 2019 BST
  • Team Kalkine
Insights Of Two AIM listed Tech Companies - Surface Transforms Plc & Falanx Group Limited
Surface Transforms Plc

Surface Transforms Plc is a manufacturer of Disk breaks for automobile and aerospace applications using cutting edge carbon ceramic technology. The company attaches significant value to research and innovation in material sciences. It has its own patented carbon-ceramic material technology and a team of highly qualified scientists and engineers who are continually working on developing new processes for the development of carbon-ceramic materials and innovative products for a variety of applications.

The company’s products have been certified to ISO9001 since 2008 as well as ISO/TS 16949 accredited since 2015 and is the only manufacturer of carbon-ceramic brakes for automotive use in the United Kingdom.

The disc brakes of the company have been adopted by Porsche for their GT2, GT3, Turbo and Cayman models, by Ferrari for their 430 and 458 models, by Nissan motor company for their GTR R35 model and by Aston Martin for their V8 Vantage model.

The company’s shares are listed on the AIM segment of the London Stock Exchange where they trade with the ticker name SCE.

Strategic Update (during the financial year 2018-19)

During the past year the company has been able to secure the below mentioned important strategic business opportunities.

German OEM 5: This new client is one of Germany’s three major automobile manufacturing companies. Securing a contract with any of these important OEM clients has been one of the strategic objectives of Surface Transforms since its inception. The contract extended to Surface Transforms will make it the only supplier of the carbon ceramic disc brakes on the front axle of one of the popular cars in their stable; the lifetime sales from the contract would be to the tune of €11.8 million over a period of  6 to 7 years that the car remains in production with start of production (SOP) to happen in October 2021.

British OEM 6: This new client is one of Britain's foremost high-performance car manufacturers. The association with this client was via a tier-one system integrator. The association with this client however is not a new one, as the Surface Transforms was previously engaged by this client for a £2 million contract for a specialist one off example in 2018, the details of which were reported in last year's annual report. In the Post balance sheet date period, this client, through the tier-one system integrator, has given the Company a repeat £6 million contracts (including spares) spread over a 3 years period with SOP to begin by the end of the calendar year2021.

Financial Update (during the financial year 2018-19)

The company on 09 September 2019 published its preliminary results for the financial year 2018-19 ending on 31 May 2019.

  • During the financial year ending 31 May 2019 the revenues of the company fell to £1,002k, which was largely due to the postponement in SOP of the OEM 6 manufacturers hyper car, variation in demand from aftermarket distributors, postponed SOP and production bottleneck issues at three of the Surface Transforms near OEM clients.
  • The Gross margin of the company deteriorated for the year to 61.6 per cent while for financial year 2018 it was 67.4 per cent, mostly due to decline in volumes of development parts and near-OEM sales combination during period.
  • The Research and development expenditure incurred by the company during the year was at £2.1 million while for financial year 2018 it was £2.0 million, mostly on testing for OEM 5 and continuing testing for OEM 3.

Source – Company’s Preliminary results published on 09 September 2019

Stock performance at the London stock exchange today. 

Price Chart as on 20 September 2019, before the market close (Source: Thomson Reuters)

On 20 September 2019, at the time of writing the report (before the market close, GMT 09.43 AM), SCE shares were trading on the London Stock Exchange at GBX 24.25.

The stock has a 52-week High of GBX 26.75 and a 52-week low of GBX 8.25. The total market capitalization of the company was £32.50 million.

Outlook

During the past 15 months to the date of balance sheet on 31 May 2019, and most importantly the three-month period post the award of contract since 31 May 2019, it has been revolutionizing in the progress of Surface Transforms as a business. The company has in its hands now multi-year, multi-million revenue contracts that it expects to help it achieve break-even EBITDA (including tax credit) by financial year 2020, a profitable EBITDA  figure (including tax credit) by the year 2021 and a profit before tax figure by 2022.

Falanx Group Limited

Falanx Group Limited is a United Kingdom based technology company providing cyber security and intelligence services to its clients. It’s business verticals comprise of Intelligence services, Resilience, Cyber security and support. The company has two divisions namely Falanx Cyber Defense and Falanx Intelligence. The Falanx Cyber Defence division is a cloud-based cyber security service, providing its services to both government and commercial clients. The Falanx Intelligence division deals with political and security risk services and also provides business intelligence services to its clients. The Falanx Intelligence division offers its services with the Assynt brand name. The vertical’s service product types include The Assynt report, embedded and dedicated analysts, strategic intelligence services and business intelligence services. The vertical’s services are offered to international clients, including international non-commercial entities, oil and gas corporations, financial organizations, insurance companies, utility providers, defense establishments, airlines companies and technology business entities. The company has its business spread over six geographical regions, namely the United Kingdom, Europe, Australasia, the United States of America and in the Middle East.

The shares of the company are listed on the London Stock Exchange where they trade with the ticker name FLX.

Strategic Update (during the financial year 2018-19)

Strategic partnership; During the year the company’s strategic partnership with SolarWinds evolved further with Falanx Group being appointed as SolarWinds’s First Threat Monitoring Service Providers (TMSP) within the United Kingdom, in continental Europe and in South Africa.

The customer base of the company increased during the year by 10 per cent to reach 400 clients.

The company also registered a growth of 50 per cent in the Managed Service Providers (MSPs) channel from the beginning of the current year

Financial Update (during the financial year 2018-19)

The company on 19 September 2019 published its preliminary results for the financial year 2018-19 ending on 31 March 2019.

  • The revenues of the company for the financial year ending 31 March 2019 increased by 73 per cent to stand at £5.2 million against revenue of £3.0 million for the financial year 2018.
  • The gross margin of the company also increased significantly during the year to stand at 44 per cent, whereas for the financial year 2018 the gross margin of the company was 31 per cent, largely on account of favorable revenue combinations and strong service utilization.
  • The Adjusted EBITDA loss of the company shrunk by 25 per cent to stand at £1.2 million whereas for the financial year 2018 it stood at £1.6 million. The company for the year reported a loss of £1.9 million whereas for FY2018 it had reported a loss of £2.4 million.
  • This financial year the loss per share of the company also reduced by 53 per cent to stand at 0.58 pence per share. For FY2018 the loss per share stood at 1.24 pence per share.

Source – Company’s annual results published on 19 September 2019

Stock performance at the London stock exchange today. 

Price Chart as on 20 September 2019, before the market close (Source: Thomson Reuters)

On 20 September 2019, at the time of writing the report (before the market close, GMT 11.41 AM), FLX shares were trading on the London Stock Exchange at GBX 1.64.

The stock has a 52-week High of GBX 4.25 and a 52-week low of GBX 1.25. The total market capitalization of the company was £5.58 million.

Outlook

The Board of the company believes that the investment made by the company during the first half of the year has begun to deliver positive results which were visible in the results of the second half of the year. Achieving cash flow breakeven is the company’s foremost objective, and it believes that it will be able to achieve that goal within a short period of time. The management is confident that it is well poised to deliver long-term value to its shareholders.

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